Since the mass introduction to the World Wide Web in the mid-1990s, there are multiple options for everything. As a restaurant owner, you are most likely aware of at least five competitors within a small radius of your business. The restaurant business is very competitive and funding can be scarce even in the best economic times. There are several options available.
Traditional restaurant loans are the most sought after. They have a long list of requirements , including a detailed and specific business plan and offering collateral such as homes and assets like vehicles to secure the funding. These loans for such necessities as restaurant equipment loans can be a mix between business and private life. They can also require a hefty down payment, a history of restaurant experience, and a near impossible perfect credit score. Many banks require substantial amounts of collateral such as a mortgage. However, they can offer the lowest interest rates and they assume most of the risk. They are still the most desired option, though usually the most unattainable.
An unsecure loan can utilize different financial options. These can range from personal credit scores to corporate bonds. There is also more risk for the lender and a hallmark of this is higher interest rates. It may be best to apply for multiple loans from various lenders to procure the best interest rate and repayment terms. A longer-term loan is more desirable, as the lender will be able to recoup any losses over the lifetime of the loan. It may be preferable to start off with an unsecured business loan. This way a car or home can stay put and a budding entrepreneur can have a shot at their dream. After your first business is successful, it will be much easier to apply for a traditional loan.
A pleasant surprise is that the Small Business Administration can offer lending solutions. The SBA cannot specifically grant a restaurant equipment loan request, but may direct you to private agencies within their umbrella. An SBA restaurant loan can be up to $150,000 with a possible three business day turnaround. These loans do not require as much capital or collateral as conventional loans, or a proven track record. The SBA assumes the risk and guarantees that the loan will be paid back, hence making your business attractive to lenders. The vast majority who receive help from the SBA are minorities and women.
Many family members could be willing to give you a hand with restaurant financing if requested. With so many financing options, you do not need to have a family member volunteer their philanthropy by lending your business the money.
With each type of funding available, it would behoove you to research to the best of your ability. See what makes sense if you are a startup or have a strong record in the restaurant business. It might make more sense for startups to apply for unsecured restaurant financing.